NationStates Jolt Archive

These are all libertarian books, which deal specifically with the Austrian Business Cycle Theory (Austrian School of Economics), amongst other things. Before someone tells me to read something else (like the Communist Manifesto, which I have already read, the choices are only these books). Maybe I'll get lucky and someone would have read these and could give them their opinion based on their experiences. :)

Don't follow the Austrian School of Economics. They're in denial about the nature of any economic system.

Don't follow the Austrian School of Economics. They're in denial about the nature of any economic system.
Don't follow logic, it makes sense.

Human Action. If it's by von Mises, it's generally good.

Don't follow the Austrian School of Economics. They're in denial about the nature of any economic system.

As an economics major, I have to ask you for your line of logic.

Human Action. It is to liberal economics what Das Kapital is to fail- Eh, I mean, to Communism.

As an economics major, I have to ask you for your line of logic.

Every system is a boom-bust system. It doesn't matter if it's lassiez-faire Capitalism, Keysnian Capitalism, Socialism, or Communism, there will be economic upturns and economic downturns.

This coming from someone who, personally, supports a more Lassiez-Faire approach.

Every system is a boom-bust system. It doesn't matter if it's lassiez-faire Capitalism, Keysnian Capitalism, Socialism, or Communism, there will be economic upturns and economic downturns.

This coming from someone who, personally, supports a more Lassiez-Faire approach.

Do you understand the Austrian's arguments?

Every system is a boom-bust system. It doesn't matter if it's lassiez-faire Capitalism, Keysnian Capitalism, Socialism, or Communism, there will be economic upturns and economic downturns.

This coming from someone who, personally, supports a more Lassiez-Faire approach.

Someone needs to read up on Austrian Business Cycle Theory.

And no you don't support laissez faire by what your saying now, your supporting mixed economic tyranny.

Don't follow logic, it makes sense.

Yep. Not following logic is the Austrian way.

Every system is a boom-bust system. It doesn't matter if it's lassiez-faire Capitalism, Keysnian Capitalism, Socialism, or Communism, there will be economic upturns and economic downturns.

Yeah, the Austrians don't argue that...what they do argue is what causes business cycles.

Ironically, though, socialist economic systems don't really have business cycles except when extraordinary events cause disruptions beyond the ability of the planners to foresee them. There never really was a general recession in the Soviet Union, although no doubt the shortfalls of the system far outweigh the benefits of economic stability.

Do you understand the Austrian's arguments?

Yeah, somewhat. They say a Central Bank is responsible for the fluctuation. I don't buy it. IF memory serves me correctly, it's got to do with the interest rates being low for too long create the well-known bubble, and then that leads up into a bust.

Ironically, though, socialist economic systems don't really have business cycles
no its pretty much constant misery and death

no its pretty much constant misery and death

Yeah, you trade no recessions for having to wait in line for three hours to buy toilet paper.

Yeah, somewhat. They say a Central Bank is responsible for the fluctuation. I don't buy it. IF memory serves me correctly, it's got to do with the interest rates being low for too long create the well-known bubble, and then that leads up into a bust.
Guess who set the interest rates.

Someone needs to read up on Austrian Business Cycle Theory.

And no you don't support laissez faire by what your saying now, your supporting mixed economic tyranny.
I know what it means, and I don't support 'Mixed Economic Tyranny'. I don't argue with the Austrian School of Economics methods, for the most part, my main problem is their REASONING.
Yeah, the Austrians don't argue that...what they do argue is what causes business cycles.


I was under the impression that the Austrian School of Economic thought followed the line of thinking that if the Central Bank didn't act like it was run by complete nitwits, the business cycle wouldn't have the well-known boom-bust.

Guess who set the interest rates.

Yeah, I know. I was merely repeating what they were arguing. I'm merely stating that I don't agree with it.

If you must, read something by Mises. Don't expect to learn anything... relevant or useful or applicable though. Make absolutely sure you balance with reading counter theories etc...

Obviously having a state economic planning board set interest rates is pure capitalism.

makes perfect sense

Yeah, somewhat. They say a Central Bank is responsible for the fluctuation. I don't buy it. IF memory serves me correctly, it's got to do with the interest rates being low for too long create the well-known bubble, and then that leads up into a bust.

That's the central gist of it. Proactive monetary policy creates distortions which in turn have to be corrected by the business cycle. You're basically borrowing against future growth to boost it now. I agree with them that proactive monetary policy is generally a bad idea, but I disagree entirely that a gold standard would somehow magically eliminate the economic evils that those policies foster.

You could just as easily, and certainly more effectively, achieve greater economic stability by setting a monetary rule and sticking to it. Since the bulk of money is created outside of the central banking system or governmental action, it makes a lot of sense to use the central bank not as a proactive force but instead as the sluice that keeps liquidity at a specific rate.

I know what it means, and I don't support 'Mixed Economic Tyranny'. I don't argue with the Austrian School of Economics methods, for the most part, my main problem is their REASONING
Reasoning based on history? on the careful study of empirical evidence?

Statements not based on random wild fantasies that have never been proved?

Yeah, somewhat. They say a Central Bank is responsible for the fluctuation. I don't buy it. IF memory serves me correctly, it's got to do with the interest rates being low for too long create the well-known bubble, and then that leads up into a bust.

Right. Austrian Business Cycle Theory states the the Federal Reserve's inflation of credit artificially lowers interest rates, which signals to businesses to invest in higher order capital-goods (in accordance with Hayek's triangle of production). Lower interest rates are really catalyzed through increased saving (as suggested by Say's Law), which means that consumers are saving for future production (and therefore producers invest in higher orders of production). And so, the federal reserve directly instigates an unsustainable boom where consumers aren't saving, but businesses are investing based on false signals. This inevitably leads to a bust, where the market rearranges itself.

I would suggest reading Murray N. Rothbard's America's Great Depression, which uses the Great Depression as a case study. Austrian economists have also applied to the theory to pre-federal reserve bubbles (in the end, they don't single out the Federal Reserve, but all government controlled inflation of the money or credit supply).

If you apply the theory to bubbles that have happened throughout history (in any epoch of history, including Tulipmania) you see that the theory actually explains the causes of the boom and the causes of the bust.

I voted for the Murray Rothbard book. When you browse it, you ought to get an idea of how good or bad it is by where Rothberg assigns the proper role of government by how much economic meddling it does.

My other two cents on the subject: "Theory of Games and Economic Behavior" by von Neumann

Obviously having a state economic planning board set interest rates is pure capitalism.

makes perfect sense

You know, the state doesn't actually force banks to lower their interest rates using any actual legal power.

I was under the impression that the Austrian School of Economic thought followed the line of thinking that if the Central Bank didn't act like it was run by complete nitwits, the business cycle wouldn't have the well-known boom-bust.

No, Austrian School of Economics is a libertarian school and ultimately believes in the least amount of central planning as possible.

I was under the impression that the Austrian School of Economic thought followed the line of thinking that if the Central Bank didn't act like it was run by complete nitwits, the business cycle wouldn't have the well-known boom-bust.

Under normal conditions, I'd say that is probably the case. Of course, extraordinary events would still probably cause some fluctuations so the system would not be entirely immune.

You know, the state doesn't actually force banks to lower their interest rates using any actual legal power.

They do, because when there is a surplus of credits it increases supply and so lowers interest rates.

If you must, read something by Mises. Don't expect to learn anything... relevant or useful or applicable though. Make absolutely sure you balance with reading counter theories etc...

As an economics major, I've found that the Austrian School makes more sense than Keynes, to be honest.

Since the bulk of money is created outside of the central banking system or governmental action, it makes a lot of sense to use the central bank not as a proactive force but instead as the sluice that keeps liquidity at a specific rate.

Using the boom of the 1920s as an example, this actually isn't correct. While money supply (that is, outside of banks) remained relatively stable in amount, controlled credit (that is, credit created by the federal reserve and federal government) increased dramatically.

They do, because when there is a surplus of credits it increases supply and so lowers interest rates.

Again, this is not the state using any legal power directly on banks. This is the central bank increasing or decreasing liquidity and the price of credit, with other banks having to lower their interest rates to stay competitive.

Human Action, hands down. Ludwig von Mises is the God of the Austrian School, may he find many a place on your bookshelf.

I recommend the Economics in One Lesson by Hazlitt (was it Hazlitt?) to anyone, as well.

As an economics major, I've found that the Austrian School makes more sense than Keynes, to be honest.

Also as an economics student, I don't, not at all. Not that I agree with everything Keynes says either, or the monetarists. I mean, Keynesian theories and Austrian theories are incredibly old, and not particularly relevant (nobody is a pure Keynesian), the problem with Austrians is, they haven't moved on.

Again, this is not the state using any legal power directly on banks. This is the central bank increasing or decreasing liquidity and the price of credit, with other banks having to lower their interest rates to stay competitive.

I don't see your point. The fact that there is no legal power forcing banks to lower interest rates is irrelevant when they have to due to the surplus of credit, due to the sale of different types of bonds by the Federal Reserve. Austrians don't only argue against government, but also any type of central banking (anything that intervenes in the natural increase or decrease of the money supply).

Using the boom of the 1920s as an example, this actually isn't correct. While money supply (that is, outside of banks) remained relatively stable in amount, controlled credit (that is, credit created by the federal reserve and federal government) increased dramatically.

But wasn't that also a different time in terms of the financial industry? Many new sources of privately created liquidity exist today that didn't exist back then.

Also as an economics student, I don't, not at all. Not that I agree with everything Keynes says either, or the monetarists. I mean, Keynesian theories and Austrian theories are incredibly old, and not particularly relevant (nobody is a pure Keynesian), the problem with Austrians is, they haven't moved on.

I don't see how it's old, as the ABCT applies to today's recession. That's like saying classical economics are old. Or, in another field, that laws of physics established in the 17th century are old. :rolleyes:

"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic."

--Herbert Hoover, the President who inaugurated the Great Depression and led us down the path of proto-Keynesian stimulus. Somehow, he gets thrown in with the free market. If it didn't work then, why does anyone expect it to now?

But wasn't that also a different time in terms of the financial industry? Many new sources of privately created liquidity exist today that didn't exist back then.

If you look at the increase in credit between the late 1990s and 2007 you'll notice that most of it came through the sale of bonds by the central bank. It's true that a lot of credit was created as a result of the fractional-reserve banking system (since a bank could loan out ten times the amount of money held by its reserve), but a large part of these exponential increase in banking dividends was also a result of GSEs (like Fannie Mae and Freddie Mac) buying loans, freeing up credit for banks to use (even if the credit wasn't actually backed up by any capital). In turn, these GSEs would re-sell the loans, and then buy more. I read that total dividends amounts to $180 trillion; this was from a left-wing news source, and I don't know if that number is accurate, but nevertheless it's obviously very high.

I would suggest reading Thomas E. Wood's Meltdown.

"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic."

--Herbert Hoover, the President who inaugurated the Great Depression and led us down the path of proto-Keynesian stimulus. Somehow, he gets thrown in with the free market. If it didn't work then, why does anyone expect it to now?

This is from Henry Morgenthau, secretary of treasury during the Roosevelt administration:

"We have tried spending money. We are spending more than we have ever spent before and it does not work."

I don't see your point. The fact that there is no legal power forcing banks to lower interest rates is irrelevant when they have to due to the surplus of credit, due to the sale of different types of bonds by the Federal Reserve. Austrians don't only argue against government, but also any type of central banking (anything that intervenes in the natural increase or decrease of the money supply).

I was attacking the idea that central banking is akin to a state centrally planning the economy, which is nonsense.

I was attacking the idea that central banking is akin to a state centrally planning the economy, which is nonsense.

It's not. If you look at the empirical evidence, it's true.

Reasoning based on history? on the careful study of empirical evidence?

Statements not based on random wild fantasies that have never been proved?
I believe that the boom-bust system we encounter is unavoidable, I believe that it is caused by the very forces that propel most things on this planet: Humans. I believe that the boom-bust cycle is caused by the oh-so-fickle human mind. When times are all well and good, people are in a general good, spendthrift kind of mood. As time wears on, people become a bit more wary, wondering when the good economic turn is going to end, spending less and saving more. Slowly, it takes a slight downturn, and then, people see the ten cent increase on a carton of milk, and people panic*. We've got ourselves a nice little bust. There are notable example, such as the Great Depression, but it should be noted that the Great Depression was greatly exaggerated by our intervention in WW1, and even WW1 itself, as well as poor farming practices. During a bust, people can no longer save, they have to spend to keep themselves clothed, to keep themselves fed, to keep themselves wam. Slowly, but surely, the people getting the money to clothe people, to feed them, to shelter them, are given hope, one might say, are encouraged to spend, and this slowly rights the economy to the point where people are no longer struggling merely to keep afloat (for the most part at least). Another factor is that as the poverty spreads, people must lower prices, also contributing in a large amount. Just a bit of a theory, brought on by my study of history and my personal experience here in the rise of yet another depression. I believe that it's a similar problem with markets, like the recent demise of the housing market. I think it's brought on by the same thing, and corrected in a similar fashion.

*note: I don't honestly think a ten cent increase in milk is the problem, it is merely an example (de?) exaggerated to prove my point, about panicky investors, consumers, and people in general.
Right. Austrian Business Cycle Theory states the the Federal Reserve's inflation of credit artificially lowers interest rates, which signals to businesses to invest in higher order capital-goods (in accordance with Hayek's triangle of production). Lower interest rates are really catalyzed through increased saving (as suggested by Say's Law), which means that consumers are saving for future production (and therefore producers invest in higher orders of production). And so, the federal reserve directly instigates an unsustainable boom where consumers aren't saving, but businesses are investing based on false signals. This inevitably leads to a bust, where the market rearranges itself.

I would suggest reading Murray N. Rothbard's America's Great Depression, which uses the Great Depression as a case study. Austrian economists have also applied to the theory to pre-federal reserve bubbles (in the end, they don't single out the Federal Reserve, but all government controlled inflation of the money or credit supply).

If you apply the theory to bubbles that have happened throughout history (in any epoch of history, including Tulipmania) you see that the theory actually explains the causes of the boom and the causes of the bust.
First off, I will read America's Great Depression, sounds like an interesting read at the least.

Second off, Tuliplomania was not exactly a Depression, if memory serves me correctly, it never reached the Stock Markets. It was all the matter of entire fortunes lost, some might say gambled away, but it never was anything but a gigantic transfer of wealth and worthless little flowers.

double plolst

It's not. If you look at the empirical evidence, it's true.

It's just pointless rhetoric.

You know, the state doesn't actually force banks to lower their interest rates using any actual legal power.
Yes it does, the state has the legal power to counterfeit currency and lend it to banks at a discount rate.

I was attacking the idea that central banking is akin to a state centrally planning the economy, which is nonsense.
That comment is utterly mistaken. A central bank adds considerably to planning the economy and indeed it does restrict the action of private entities in a massive manner.

When you eliminate all other options or force another party to take one option by making the rest impossible to sustain, you are essentially planning the economy in this case.

Yes it does, the state has the legal power to counterfeit currency and lend it to banks at a discount rate.

Legal tender can't, by definition, be counterfeit.

Yes it does, the state has the legal power to counterfeit currency and lend it to banks at a discount rate.

How the hell is it counterfeiting, it is fiat currency, so by definition if the
state says it's money IT IS money.

I was attacking the idea that central banking is akin to a state centrally planning the economy, which is nonsense.

"Money forges the connecting link between all economic activities."

--Murray Rothbard

A central bank, as en entity which increases and decreases the supply of money for whatever reasons it desires impacts the valuation of all goods in the economy. Its effects will be felt economy wide, good or ill, temporary or permanent. I would argue that a central bank makes rational production difficult, because a central bank impacts the market's greatest mechanism: prices.

Oh God, there is so many of them.

Oh God, there is so many of them.

Well, at least it's change. NSG needs some variety, give the largely centrist/American left on here a run for their money.

I believe that the boom-bust system we encounter is unavoidable, I believe that it is caused by the very forces that propel most things on this planet: Humans. I believe that the boom-bust cycle is caused by the oh-so-fickle human mind. When times are all well and good, people are in a general good, spendthrift kind of mood. As time wears on, people become a bit more wary, wondering when the good economic turn is going to end, spending less and saving more. Slowly, it takes a slight downturn, and then, people see the ten cent increase on a carton of milk, and people panic*.

You are, to a degree, correct, but unfortunately this doesn't take into account the massive inflationary policy of government and the federal reserve during the boom period. The bust is not necessarily the bad part of the business cycle, it is only the inevitable conclusion to the boom period. All boom periods, throughout history, have been marked by government-induced inflation (inflation should be considered an expansion of the money supply, not an increase in the general price level).

We've got ourselves a nice little bust. There are notable example, such as the Great Depression, but it should be noted that the Great Depression was greatly exaggerated by our intervention in WW1, and even WW1 itself, as well as poor farming practices.

These poor farming practices were largely catalyzed by government subsidization of the farmers and attempts to centrally plan the agricultural industry. The United States went through a recession in 1920-1921, which was solved quickly because the government did not intervene (although the bust was caused by the inflationary policies during the First World War; all modern wars have been funded through inflation). The Great Depression was of a direct result of the credit inflation of the 1920s. Rothbard keeps track of the controlled inflation of the credit supply in the book.

During a bust, people can no longer save, they have to spend to keep themselves clothed, to keep themselves fed, to keep themselves warm.

This isn't necessarily true. The Economist, for example, has recently published an article detailing the greater savings in banks (as opposed to an increase in consumption). It is the lack of saving and the propping of low interest rates artificially (through credit expansion) which catalyzes the bust, in the first place (otherwise, a lack of saving means that interest rates would be higher and businesses would not invest for future consumption).

Second off, Tuliplomania was not exactly a Depression, if memory serves me correctly, it never reached the Stock Markets. It was all the matter of entire fortunes lost, some might say gambled away, but it never was anything but a gigantic transfer of wealth and worthless little flowers.

Tulipmania wasn't a depression, but it most certainly was a bust.

Also, the thing that seriously harms them even if they might sometimes have good points is their arrogant false sense of objectivity and empiricism, and their belief that their economic laws are as accurate as the laws of physics, which is such bullshit, and laughable on a philosophical level.

How the hell is it counterfeiting, it is fiat currency, so by definition if the
state says it's money IT IS money.

It is legalized counterfeiting.

It is legalized counterfeiting.

...

Also, the thing that seriously harms them even if they might sometimes have good points is their arrogant false sense of objectivity and empiricism, and their belief that their economic laws are as accurate as the laws of physics, which is such bullshit, and laughable on a philosophical level.

Apart from calling it "bullshit", you haven't even worked at supporting any of your claims. The only arguments which are "laughable" are yours.

Legal tender can't, by definition, be counterfeit.
"Legal tender" is just an arbitrary quality designated by a government body.

Currencies nowadays have no value. They're merely paper, they're not backed by a proportional 1:1 value in gold or something tangible. Therefore, in the classical definition, it is counterfeit, because it is a note that has no actual value.

Apart from calling it "bullshit", you haven't even worked at supporting any of your claims.

Ah, I see. What claims are these?

Ah, I see. What claims are these?

You don't even know your own claims?

"Legal tender" is just an arbitrary quality designated by a government body.

Currencies nowadays have no value. They're merely paper, they're not backed by a proportional 1:1 value in gold or something tangible. Therefore, in the classical definition, it is counterfeit, because it is a note that has no actual value.

Nothing has actual value. Commodities have no value, other than subjectively designated by society. Again, Austrians phail at philosophy.

"Legal tender" is just an arbitrary quality designated by a government body.

Currencies nowadays have no value. They're merely paper, they're not backed by a proportional 1:1 value in gold or something tangible. Therefore, in the classical definition, it is counterfeit, because it is a note that has no actual value.

The subjective theory of value states that nothing has innate objective value. All currency is then counterfeit.

Nothing has actual value. Commodities have no value, other than subjectively designated by society. Again, Austrians phail at philosophy.

It has a value assigned to it by the value perceived by the consumer. Because gold has a perceived value it serves to back up a paper currency (even though, ideally, there would be no paper currency). It's not just a lack of gold backing, but a lack of backing from a capital good in general.

You "phail" at the principles of economics.

You don't even know your own claims?

I don't remember making any bold claims about the economy. I said that central banking is not the same as central planning (in the sense that nutty anarcho-cappies and libs think of it), but that is just some semantic irrelevance, it cannot be backed up. I said that legal tender is legal, this is a tautological truth, and does not need to be backed up empirically.

It has a value assigned to it by the value perceived by the consumer. Because gold has a perceived value it serves to back up a paper currency (even though, ideally, there would be no paper currency). It's not just a lack of gold backing, but a lack of backing from a capital good in general.

You "phail" at the principles of economics.

Fiat currency has value. Take every functioning economy that runs on a fiat currency. You phail.

It has a value assigned to it by the value perceived by the consumer.

You seriously don't think that a consumer considers a $100 bill as valuable?


Because gold has a perceived value it serves to back up a paper currency (even though, ideally, there would be no paper currency). It's not just a lack of gold backing, but a lack of backing from a capital good in general.

You "phail" at the principles of economics.

Again, perceived value is not actual value, it is merely perceived, not real.

I said that central banking is not the same as central planning (in the sense that nutty anarcho-cappies and libs think of it), but that is just some semantic irrelevance, it cannot be backed up. I said that legal tender is legal, this is a tautological truth, and does not need to be backed up empirically.

That is a claim, is it not? It's claim that you haven't provided an argument for; you are just stating it. Central banking is central planning because the central bank can only exist under the conditions that it is created and supported by the government; private cartellization of the banking system has always failed, historically speaking. The state has used central banking to fund their welfare and warfare programs, and in the sense of expanding credit to loan into venues approved by government the central bank is central economic planning.

You are, to a degree, correct, but unfortunately this doesn't take into account the massive inflationary policy of government and the federal reserve during the boom period. The bust is not necessarily the bad part of the business cycle, it is only the inevitable conclusion to the boom period. All boom periods, throughout history, have been marked by government-induced inflation (inflation should be considered an expansion of the money supply, not an increase in the general price level).

Oh, I don't deny that. I just don't buy that they're the main cause for the problem.

These poor farming practices were largely catalyzed by government subsidization of the farmers and attempts to centrally plan the agricultural industry. The United States went through a recession in 1920-1921, which was solved quickly because the government did not intervene (although the bust was caused by the inflationary policies during the First World War; all modern wars have been funded through inflation). The Great Depression was of a direct result of the credit inflation of the 1920s. Rothbard keeps track of the controlled inflation of the credit supply in the book.

I disagree. I think that the Great Depression was caused by Europe's completely devastated infrastructure and economy. That way, the US became a major player on the World stage, one of the very few industrialized countries left with all of it's power intact. I think that's what created the bust, the way Europe had to turn to US business... And when they recovered, economically, the US businesses weren't prepared to switch all of this extra production to suit American Consumers. The panic on the part of the shareholders in the companies who were losing money took their problems to the stock market and tried to get out of it, it all went to hell. Then the US, who was still a large economic player, went down, it dragged most of the rest of the world with it.

This isn't necessarily true. The Economist, for example, has recently published an article detailing the greater savings in banks (as opposed to an increase in consumption). It is the lack of saving and the propping of low interest rates artificially (through credit expansion) which catalyzes the bust, in the first place (otherwise, a lack of saving means that interest rates would be higher and businesses would not invest for future consumption).

Mmm. You might be right there. I still stick by my second statement about recovering from a bust.

Tulipmania wasn't a depression, but it most certainly was a bust.
Depends on your definition of 'bust'.

You seriously don't think that a consumer considers a $100 bill as valuable?

The consumer does in the sense that the consumer is assured that the $100 bill will be able to buy him or her an arbitrary quantity of goods. When the bill is backed by gold the consumer's purchasing parity is guaranteed (under a pure gold standard, at least), whereas under a fiat currency the purchasing parity is not guaranteed - it's only held up by government bonds, and the illusion of stability.


Again, perceived value is not actual value, it is merely perceived, not real.

Economically speaking, this is irrelevant.

You seriously don't think that a consumer considers a $100 bill as valuable?

Given a choice between 100 million fiat US dollar and a gold bar worth $100 no one would choose the 100 million. ;)

Fiat currency has value. Take every functioning economy that runs on a fiat currency. You phail.

You mean, every failed economy?

The consumer does in the sense that the consumer is assured that the $100 bill will be able to buy him or her an arbitrary quantity of goods. When the bill is backed by gold the consumer's purchasing parity is guaranteed (under a pure gold standard, at least), whereas under a fiat currency the purchasing parity is not guaranteed - it's only held up by government bonds, and the illusion of stability.

The world could one day suddenly see gold as worthless thus gold back currencies only have the illusion of stability.

You mean, every failed economy?

The ones that are working. How many nations that you know of dont use a fiat currency?

That is a claim, is it not? It's claim that you haven't provided an argument for; you are just stating it.

Look, in my experience, when libertarians on the internet talk about central planning, they're thinking about soviet style planning. It was a pre-emptive to show how it's different to that, I don't care if you could technically call it centrally planning definitionally, in general discourse when people talk of central planning they talk of very heavy state interference, with no market. Again, I don't care if it fits the definition technically, I don't wish to dispute that.


Central banking is central planning because the central bank can only exist under the conditions that it is created and supported by the government

The same is true with most things. You know, like property rights etc...

Oh, I don't deny that. I just don't buy that they're the main cause for the problem.

Why not?

I think that the Great Depression was caused by Europe's completely devastated infrastructure and economy.

Rothbard disproves the theory that Europe had a major impact on the worsening of the depression, although U.S. government loans to prop Europe's failing economy did contribute to the massive inflationary boom of the 1920s.

That way, the US became a major player on the World stage, one of the very few industrialized countries left with all of it's power intact. I think that's what created the bust, the way Europe had to turn to US business... And when they recovered, economically, the US businesses weren't prepared to switch all of this extra production to suit American Consumers.

This doesn't even make sense, nor does it have any historical evidence which supports the theory. U.S. exports made up less than 6% of the economy at the time.

The panic on the part of the shareholders in the companies who were losing money took their problems to the stock market and tried to get out of it, it all went to hell. Then the US, who was still a large economic player, went down, it dragged most of the rest of the world with it.

Actually, the recession began in Great Britain before it began in the United States (about six months earlier), and central banks in Austria and Germany were already failing (and were bailed out by the Federal Reserve and by the New York Reserve). The recession has to do with a general breakdown in banking and the fact that businesses find out that their long-term investments were poorly speculated because there was no actual consumer demand for their goods (they assumed there was due to the low interest rates, which are normally low because of increased savings).

Depends on your definition of 'bust'.

It was a recession; it was the popping of an inflationary bubble.

The ones that are working. How many nations that you know of don't use a fiat currency?

How many nations that use fiat currencies have a stable economic system? None.


The world could one day suddenly see gold as worthless thus gold back currencies only have the illusion of stability.


This could be true, but ignores the fact that gold has had a perceived value since the beginning of money. The idea of precious metals is what gave birth to the idea of money, in the first place (replacing the barter economy).

The consumer does in the sense that the consumer is assured that the $100 bill will be able to buy him or her an arbitrary quantity of goods. When the bill is backed by gold the consumer's purchasing parity is guaranteed (under a pure gold standard, at least)

It's not guaranteed, just because the value of Gold doesn't fluctuate as much, doesn't mean it is incapable of fluctuating heavily. Again, it is absolutely equally subjective, there is nothing more true about saying "gold has value" than saying "this 100$ bill has currency".


Economically speaking, this is irrelevant.

You said that Gold has real value and that fiat currency doesn't, this is a false claim, relevant or not.

Look, in my experience, when libertarians on the internet talk about central planning, they're thinking about soviet style planning. It was a pre-emptive to show how it's different to that, I don't care if you could technically call it centrally planning definitionally, in general discourse when people talk of central planning they talk of very heavy state interference, with no market. Again, I don't care if it fits the definition technically, I don't wish to dispute that.

Then you wish to dispute things that are irrelevant to this thread. There are varying degrees of central planning.

The same is true with most things. You know, like property rights etc...

I'm not a fullhearted anarcho-capitalist; I do believe that government needs to exist for the protection of property rights. On the other hand, I don't see why property rights wouldn't exist without government.


It's not guaranteed, just because the value of Gold doesn't fluctuate as much, doesn't mean it is incapable of fluctuating heavily. Again, it is absolutely equally subjective, there is nothing more true about saying "gold has value" than saying "this 100$ bill has currency".


Apart from government-induced fluctuations (by setting the price of gold themselves), gold has never shown these wild fluctuations that "could" effect it as a monetary backing.


You said that Gold has real value and that fiat currency doesn't, this is a false claim, relevant or not.


No, I said that money backed by gold has a tangible perceived value (where the money can be redeemed in precious metal), while the artificial expansion of credit means that the person who owns the money cannot redeem their credit in actual money. So, fiat currency is great while there is trust in the government, but when there isn't and people figure out that they cannot redeem their credit into money of value (as in, its worth to buy a commodity) then it's not so great.

Why not?

Because I like to annoy you.;)

Kidding, obviously. I think that there are larger problems out there then inflation, especially when you consider how much Calvin Coolidge pulled a reign in on the massive inflation at the time.

Rothbard disproves the theory that Europe had a major impact on the worsening of the depression, although U.S. government loans to prop Europe's failing economy did contribute to the massive inflationary boom of the 1920s.

Which, according to your line of thought that it was the inflation and interest rates that led to the Depression, Europe did play quite a part in the events leading to the Depression, no?

This doesn't even make sense, nor does it have any historical evidence which supports the theory. U.S. exports made up less than 6% of the economy at the time.

I must ask for a source.

Actually, the recession began in Great Britain before it began in the United States (about six months earlier), and central banks in Austria and Germany were already failing (and were bailed out by the Federal Reserve and by the New York Reserve). The recession has to do with a general breakdown in banking and the fact that businesses find out that their long-term investments were poorly speculated because there was no actual consumer demand for their goods (they assumed there was due to the low interest rates, which are normally low because of increased savings).

I have no response to this. Mostly because it offers nothing but a chance to restate what I have already said.

It was a recession; it was the popping of an inflationary bubble.
Could it really be called an INFLATIONARY bubble? Inflation seems like a bit of a boogeyman to blame on Tulipmania, the way it started, the way it ran, the way it ended, even. Unless you're speaking not of monetary inflation, but of the inflation of the Tulip market.

And with that, I must take a break. It's been enjoyable and stimulating, thank you.

Apart from government-induced fluctuations (by setting the price of gold themselves), gold has never shown these wild fluctuations that "could" effect it as a monetary backing.


This is what I'm talking about, it's highly un-empirical and highly unscientific. It's a classic correlation = causation mistake. Assuming that the price of Gold never had wild fluctuations prior to government intervention (I would like you to source that), is in no way proof that the price of Gold cannot fluctuate wildly without government.


No, I said that money backed by gold has a tangible perceived value (where the money can be redeemed in precious metal), while the artificial expansion of credit means that the person who owns the money cannot redeem their credit in actual money. So, fiat currency is great while there is trust in the government, but when there isn't and people figure out that they cannot redeem their credit into money of value (as in, its worth to buy a commodity) then it's not so great.

The post I was originally disputing was this (yes I know it's not you):

Currencies nowadays have no value. They're merely paper, they're not backed by a proportional 1:1 value in gold or something tangible. Therefore, in the classical definition, it is counterfeit, because it is a note that has no actual value.

How the hell is it counterfeiting, it is fiat currency, so by definition if the
state says it's money IT IS money.
Yeh, the state has a legal right to counterfeit. This allows them to manipulate interest rates.

legal right to counterfeit.

Again: ....

meaning, read that out loud.

Also, I'm not a monetarist fanboy, nor am I an extreme Keynesian, if anyone got that impression.

How many nations that use fiat currencies have a stable economic system? None.

How many economies don't run on a fiat currency? None.

This could be true, but ignores the fact that gold has had a perceived value since the beginning of money. The idea of precious metals is what gave birth to the idea of money, in the first place (replacing the barter economy).

Bullshit. All kinds of things have been used as money, including different kinds of stones, shells, and clay pottery have been used as money in the past likely long before the mining of money became advanced enough for metal to become viable as a currency.

Yeh, the state has a legal right to counterfeit. This allows them to manipulate interest rates.

A legal counterfeit is a contradiction in terms.

Rothbard is probably the best-known of them, so read his book, unless you've read one by him.

Don't follow logic, it makes sense.*giggles at the idea of Austrian economics being logical*, because...

Also, the thing that seriously harms them even if they might sometimes have good points is their arrogant false sense of objectivity and empiricism, and their belief that their economic laws are as accurate as the laws of physics, which is such bullshit, and laughable on a philosophical level.of this.

The consumer does in the sense that the consumer is assured that the $100 bill will be able to buy him or her an arbitrary quantity of goods. When the bill is backed by gold the consumer's purchasing parity is guaranteed (under a pure gold standard, at least), whereas under a fiat currency the purchasing parity is not guaranteed - it's only held up by government bonds, and the illusion of stability. There is a guarantee that the he currency when the consumer receives it will buy him the same amount of gold as when he'd go to exchange the currency? (I.e., there's a guarantee that the price of gold won't fluctuate?)
There's a guarantee that people will still continue to value gold?

Also, the thing that seriously harms them even if they might sometimes have good points is their arrogant false sense of objectivity and empiricism, and their belief that their economic laws are as accurate as the laws of physics, which is such bullshit, and laughable on a philosophical level.

That's sort of the point of Austrianism.

Mises, in Theory and History, attacks non-Austrian economists for having this view.

Rothbard.

These are all libertarian books, which deal specifically with the Austrian Business Cycle Theory (Austrian School of Economics), amongst other things.

I'd say that the Austrian school has proven itself quite sucky... anyway, when it comes to books, my advice is always GOTTA CATCH'EM ALL! If you can't buy them take them at the library so you can evaluate them... or download them. The Mule works wonders with books!

No need. The Austrians distribute their books online for free. Part of why Misesians are awesome.

No-brainer, Money, Bank Credit, and Economic Cycles. It's written by Jesus, and Jesus wouldn't lie to you.